OpenAI Funding Round Shrinks to $20 Billion at $1.25T Valuation
OpenAI’s latest OpenAI funding round has come in well below plan. The ChatGPT maker has secured about $11 billion in commitments, less than half of its original $30 billion target, at a $1.25 trillion valuation, according to The Wall Street Journal. The Financial Times separately reported on Friday, October 30, that OpenAI has cut the round’s target to about $20 billion.
OpenAI Funding Round: What Changed
Earlier in October, OpenAI was reportedly looking to raise around $30 billion at a valuation of $1.4 trillion. Bloomberg reported on October 22 that the valuation under discussion had moved to $1.25 trillion, a $150 billion drop, while the company still aimed for about $30 billion.
According to the FT report, as summarized by Reuters, OpenAI set Friday as the deadline for investor commitments, but the “first close” is expected to raise less than $20 billion because some investors reduced their allocations. The WSJ said OpenAI expects to raise more in the coming weeks, and the FT said wealthy individuals will be able to invest later through a retail offering at the same $1.25 trillion valuation.
Who Is Investing
A consortium of UAE investors that includes state-backed tech fund MGX is expected to be the largest participant. As part of that deal, OpenAI would get an option to lease newly built computing capacity in the region, the FT reported. Founders Fund, Coatue, Sequoia Capital and Andreessen Horowitz are also expected to take part. OpenAI, MGX, Coatue, Sequoia and Andreessen Horowitz did not immediately respond to Reuters’ requests for comment.
Why Investors Pulled Back
The timing is difficult. US tech stocks are in a selloff driven by worries over huge AI spending. The Nasdaq fell 2.9% on Friday and is down 7.8% from its record close on October 6, Reuters noted. The same day, Intel shares closed down 28.58% after weak guidance, its worst day since the 1970s according to CNBC, following the quarter we covered in our Intel Q3 earnings report.
Competition for the same money is another factor. OpenAI has wanted to close this round before Anthropic’s stock market debut, expected in mid-November, because both companies are pitching a similar pool of investors. Anthropic filed publicly for its Nasdaq IPO on October 26, and Bloomberg has reported that investors see a fair value for it of around $1.4 trillion to $1.5 trillion.
What It Means for OpenAI
Even at $1.25 trillion, OpenAI would be the most valuable private company ever, up from the $852 billion post-money valuation of its $122 billion round in March. The company filed confidential IPO paperwork in June, and CFO Sarah Friar has told employees a listing could happen in 2027. A smaller first close does not stop that plan, but it shows investors are now more careful about late-stage AI prices. For ChatGPT users, nothing changes for now; the company recently doubled ChatGPT Pro usage limits.
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